Pixar in Vancouver

I have read seven stories this morning about the new Pixar animation studio in Vancouver. It is positioned as a coup for Canada. Every story has mentioned, in passing, the ‘tax break’ that got Pixar to Vancouver.

Now, here’s the deal – and it goes back to my previous post about ‘grants’ versus other kinds of incentives for economic development.

Listen to me carefully on this. The tax credit program for new media in British Columbia will be worth five to 10 times as much cash to Disney/Pixar than any ‘grant’ ever given by McKenna or Lord (with the exception of the Molson deal).

When there was a national story about a company coming to New Brunswick (and this was reserved for only the biggest of deals), invariably the story was – at least in part – about this province buying in companies with taxpayer money. The culture of defeat. Picking winners. You know the drill.

Of course, the national media (and I don’t particularly blame them) would be biased towards Vancouver. It’s a large and beautiful city. Of course Pixar would want to go there. Why would Pixar ever want to go to New Brunswick? For a big fat government grant. And, typically, they will throw in a quote from AIMS saying that when the grant runs out, the company will leave because there was no real reason for them to be here in the first place.

This outright crap – is a key reason why New Brunswick has stagnated for all these years. No one really believes that Pixar could ever want to be in New Brunswick. But no one ever really tried. If New Brunswick had put the same new media tax incentive program in place. If it had attracted a number of smaller players (which sets the ground for the big guys). If it had developed a world class research centre in animation at UNB. If it was turning out the top graduates in Canada in animation development, etc. etec. etc. then it is likely that Pixar would set up here.

The national media coverage would likely be about the ‘incentives’ to buy Pixar but no matter. The national media has never supported regional economic development in this country. Not in the almost 20 years I have been following it. The Toronto Star is paternalistic about Atl. Canada (they need more EI and Equalization) with the exception of a growing number of its columnists which have adopted a hostile stance in recent years (in response to McGuinty’s fairness doctrine). The Globe & Mail literally ignores the issue and the National Post has at least a story or commentary virtually ever day about the evils of Equalization.

Back to my point for this post. I’d like to see far less ‘grants’ used as incentives and far more use of other tools such as investment tax credits. Don’t sugar coat it. Both are cash. Both are taxpayer money but for some reason when we put the word ‘tax’ in the title – people don’t seem to mind as much. Maybe we liken it to our own tax rebate cheque each year. Who knows?

Sorry, folks. A little venting this morning. Pixar is the kind of anchor that can really help an industry cluster grow. Vancouver has really done a good job of attracting film and new media. There is really no interest in growing this sector in New Brunswick -at any level.

And that’s fine, I guess. But I’d like to see some sectors where we are trying to seriously compete (other than call centres). And, we need to get out front, on a few emerging industry growth sectors. Green energy? We are the last to the party so I think the opportunity is limited (not zero but limited).

And by the way, as to that “as soon as the grant runs out the company will leave” myth, ExxonMobil is still here and has expanded several times. UPS is still here. In fact, most of the big named international firms that were attracted to New Brunswick in the 1990s are still here and many have expanded.

9 Responses to Pixar in Vancouver

Vancouver (like Toronto) has managed to create not just a film industry but also a mindset that they ARE a film centre and, more importantly, a hub around which all kinds of digital media and related industries revolve (including education). They’ve seeded it with tax breaks and the idea that it’s a natural geographic location with its proximity to California but apart from these, they THINK they’re the place for companies to be. It’s not a, “Let’s give them some money, cross our fingers and hope they come,” attitude. In their mind, they think you’re nuts if you don’t.

Has New Brunswick ever approached these things with that kind of attitude? I suspect the answer is no.

Well, I think to suggest that Pixar could have selected New Brunswick instead of Vancouver if the tax treatment had been the same flies in the face of reality. Vancouver has a population roughly three times that of New Brunswick, with three post-secondary institutions that have animation in their curriculum, including the Vancouver Film School. Vancouver is in the same time zone as Los Angeles. In Vancouver, there is significant experienced talent already in the industry, from junior programmers to project managers to executives, which cannot be said of New Brunswick. And the BC government has dedicated project staff to the development of the animation industry, whereas in NB there is mostly wishful thinking.

New Brunswick does have potential in this industry, but it would need to focus support on the niche capability that already exists here and grow that industry one step at a time. Ask Fowler if he is feeling that support right now.

Notice that British Columbia (apparently) did not mess around trying to locate this business in a poltically advantageous area of the province. That is part of New Brunswick’s problem; let’s get them in the province in the place they feel they can be most successful and forget about where it might have the most political benefit. If they locate in NB, it would be good for NB.

Second, we have a defeatist attitude that this is too big of a player with investments that are too high for us to consider. Meanwhile, we dish out $80 million to a yarn factory and $60 million to a branch of a Caisse. I suspect these numbers would be attractive to Pixar.

Finally, if we were focused, with priorities, we’d have incentives in place and targets identified. If the animation industry was such a target, we should have known Pixar was an expansion target. There was a recent trade visit to California; it would be interesting to know if Pixar was on the list of meetings/visits. We certainly cannot be aware of every opportunity but if we have strategic sectors identifed for economic development, it would increase the odds of us knowing of these opportunities before deals are announced in the G&M.

Pixar may not have considered New Brunswick but there was a time they would not have considered Vancouver either. Over time, Vancouver (and BC more broadly) built an industry so that now it is a player, and not a small one. They developed an infrastructure, including education, and I believe over the years aggressively marketed themselves. Kurt Vonnegut again: “You are what you pretend to be.” Eventually, Vancouver was the film centre they pretended to be.

There are two red herrings above, first, this has nothing to do with a ‘mindset’, let’s not get philosophical. It also has nothing to do with interprovincial rivalries. Fatkat didn’t fail because it was in Miramichi and not Moncton.

And I agree with George, Vancouver’s film industry has always been connected with LA, they have tons of flights and its a two hour flight. Executives can do that in a day. The idea that they are going to embark on a multi day excursion to get to New Brunswick, is, well, hate to say it but as crazy as saying NB’s economic woes are due to bilingualism. Sheridan College is THE pre-eminent animation school and there are dozens of CGI animation houses in Toronto but they didn’t locate there. They also didn’t locate in Chicago or New York.

But the analysis has missed what I think is most important here. It’s true, and we know its true, that the policies simply don’t exist. There is no point trying to sell a location when you have no policies. Pixar would set up in Nova Scotia before NB, as the film industry has at least tenuous links to Nova Scotia through Dreamworks and because Nova Scotia has an ambitious tax credit program.

However, the story says that Pixar will have 100 jobs. Big deal. At its height Fatkat had MORE employees than Pixar, a huge company, will in BC. So forget the Pixar example, we see what BC and Vancouver does for a lousy 100 jobs, whereas in NB we saw the government response to FatKat’s fortunes- a blase statement about how ‘we really can’t do anything for them’. And this isn’t the only example of its kind, the Caissie example is unfair, thats a financial institution and the funds didn’t go for jobs, but the Yarn example is a good one. We saw just how much money went to guys to package yarn, $80 million was it? We just talked about Fatkat, what did they get, something like 3 million with OVER a hundred employee?

This goes back to government priorities. Certainly if there is such non interest in Fatkat then its no surprise there is NO interest for Pixar, thats a given. So at a root level this is simply another example of a government that has the OPPOSITE priorities to ones at this blog, and I’d even venture to say most New Brunswickers.

As for the final paragraphs, UPS and other companies have simply been given a free ride, that’s why they are staying put. There is something to be said for a desparate province to simply announce ‘look, we’ll have NO corporate income tax in exchange for jobs’, but that’s not what the province has been doing.

So again, it comes down not to analysis, but what is to be done to lobby for an alternate ‘vision’ of the province.

Take a closer look. BC does not have a Digital Media Tax Credit and has actually been losing some companies in recent years to Quebec. This animation company will qualify for its Film Tax Credit or the Digital Animation and Visual Effects Credit. This is not video game related, but would cover animation companies such as Pixar.

There is a distinct difference between the way governments, including local ones in PEI, Nova Scotia, and New Brunswick classify these works. PEI and NS have both a Film and Digital Media credit, while NB has just a Film Credit. This should cover companies such as Pixar and the work they do. But the simple truth is that Pixar located in BC because of the existing industry, the proximity to the head office in California, and the extensive school and labour presence that exists for new talent.

If we want to grow high tech industries here, we first need to create high tech schools. Maybe we should think about giving tax breaks to the Vancouver Film School so that they will locate in NB? The future will not be about who has the best credit, but who has the best labour.

One other thing. Not sure about this new focus of your on animation? Most companies in the world who have animation expertise in films are now moving to diversify their offerings for video game development outsourcing as well. The film industry has been overtaken by the digital media industry and gaming and this trend is going to continue. Animation uses artists, video games use artists and computer programmers and is an industry that is higher up the value chain. If NB is going to focus their efforts in a creative industry they should be focusing on the interactive media side and not just animation.

This is partly an example of ‘getting the government to do what people can do’. The community college in Miramichi ALREADY teaches not only animation but graphics design for gaming as well as game design. And the fact is that if I wanted to learn either, I don’t need to go to the college AT ALL. Flash is butthead easy to learn, and there are thousands of tutorials.

So schooling is not the issue, although a link up with a more popular school is a good networking idea. It’s true about the film industry, one of my recent favourites was “Flushed Away” by the british studio that does Wallace and Gromit, but FA did so poorly it put the entire company at risk-from ONE film. The video game industry does more sales now than the film industry, so we KNOW that’s where the money is, but again, there are a few dominant players and its a lot of work getting product in there. Even with a Film Tax credit lets say a bunch of New Brunswickers made a film-the reality is that there is virtually nowhere to sell it. In the end the CBC and NFB may buy it just to support the industry, but that means its gets one showing and is forgotten.

Even the film industry is changing, a bunch of guys just made a Tolkien movie for $5000 and won numerous awards, so again, even tax credits only mean so much. But for larger projects, it simply speaks volumes when people shop around-are you going to buy a car from the guy who sends out ads, pounds the pavement and really wants your business, or the guy next door you’ve never heard of, has lousy hours, and is rude to you?

And just to reiterate my TVO example, with a New Brunswick television station then that group of guys who made thehuntforgollum.com for $5000 would actually get some money for it through advertising, and have it featured on a television station. Now, I’m not saying that every guy with a camcorder should get a TV show, but there is LOTS of quality out there, heck, Charles has more interesting interviews with a hand held photo camera than most news shows. That’s an angle not mentioned about BC, with their provincial television station you can bet that if Pixar calls up with an offer to co-produce something, the station takes it-and almost ALL video/film/digital media projects are co-productions.

In the end though this comes down to criticism of NB’s **** poor excuse for a Digital Media investment plan. You can go to Mirimichi’s NBCC website and they don’t even have an online link to animations from the school’s students!! And THAT costs NOTHING (so maybe that’s sort of an example of Bill’s ‘mindset’ at work).

By the way, while it isn’t stated, its usually pretty easy to qualify for digital media tax credits with film-actually, the new federal requirements for the film/media industry REQUIRES they be digital media. It’s not stated at the website, but most in the industry know this. I’ve said it before, I have a friend who is a corporate accountant who used to work for Revenue Canada and corporations essentially pay the taxes they WANT to, mostly so that when they need more money, they can announce in the media how much they contribute (although that is changing, now they usually list the jobs).